1. The US July PCE data did not show a renewed acceleration in inflation, nor did it continue to improve; the PCE remains significantly higher than the Fed's 2% target; core PCE has remained at 3.3%, indicating that underlying inflation remains relatively sticky.
The data has not decreased, and is actually slightly hawkish.
2. Why is the CPI only 2.5%, while the PCE reaches 3.3%? This is the most noteworthy aspect of this news. CPI and PCE are not simply "two versions of inflation"; their weights and statistical methods differ. The July figures of 2.5% for core CPI and 3.3% for core PCE are not contradictory. In fact,
this precisely illustrates that we cannot conclude that US inflation is close to the 2% target based solely on the improvement in the July CPI.
3. The real highlight is Warsh's speech. The PCE itself does not provide a particularly clear policy answer, as the data largely aligns with the market's previous understanding of a high-inflation environment.
However, Warsh's speech may change the market's judgment on the future policy path, especially whether he believes that the current 3.3% core PCE is still too high.
